When Apple Buys Ford
Silicon Valley is notorious for breaking into outdated markets, streamlining efficiencies, and putting the dinosaurs in the industry out of business. And they are damn good at it.
The next big frontier that the major players have their eyes set on is the autonomous car market.
That’s too bad for Detroit, right?
You would think!
But as a matter of fact, Detroit is actually LEADING the autonomous tech field according to new research. Take a look at this infographic from Navient Research. Both General Motors (NYSE:GM) and Ford (NYSE:F) are leading tech giants Alphabet (who owns Waymo), Tesla, and Uber.1
While most investors focus on tech players like Tesla and Uber… the real autonomous tech is coming from Detroit, Michigan
But the thing about this data is that it was released in April… Any investment opportunity has been priced into the market. However, a more recent development has caught my attention, which led me to connect some dots.
And today, I’m finally willing to come forward with my bold prediction…
Did you notice a major Silicon Valley company that is absent on the chart above?
Hint: they’ve got a cash hoard of $257 billion dollars just waiting to be put to use, and they’ve previously experimented with a highly secretive automotive project labeled Project Titan.2
That’s right. I’m talking about Apple (NASDAQ:AAPL).
Recently, their CEO Tim Cook sat down for an interview on Bloomberg TV to discuss Apple’s plans in the autonomous car market.
Cook had a couple interesting comments regarding Apple’s plans:
“I think there is a major disruption looming.”
“What we’re focusing on, or at least what we’ve talked about focusing on publicly is we’re focusing on autonomous systems.”
“We see it as the mother of all A.I projects.”
“We’ll see where it takes us. We’re not really saying from a product point of view, but we are being straightforward in saying it’s a core technology that we view as very important.”
Here’s the thing…
Apple is going to be in the electric car market one way or another. Whether it’s by providing software, or by physically producing their own car is the question on which the stock price hinges on.
Look at these specific phrases — “or at least what we’ve talked about focusing on publicly” and “We’re not really saying from a product point of view…”
Seems to me like Cook is hiding something… Sure, he could just be leading on the markets — pretending that Apple has something up its sleeve when really they don’t. But this time I think it’s different.
Apple has been trying to dodge the “one-trick pony” arguments for years. The iPhone is obviously a great product but investors are wondering what’s next — and have been for some time.
That gave them plenty of time to think of their next move — one that I predict will cause a big shakeup on the auto industry…
One Great American Company Buys Another
That’s right. I’m predicting the Apple will buy the Ford Motor Company (NYSE:F), in a move that could happen sooner than anyone expects. Frankly, it’ll be a noble ending to one of the most innovative companies in the last 100 years.
Think about it. Tim Cook just admitted that Apple sees the market as one “ripe for disruption” and as a “core technology.” But I’m supposed to believe that Apple is content being a service provider?
No way! Just look at the top chart I showed you. There are plenty of companies that are already well on their way towards creating an autonomous vehicle for the masses. But I’m supposed to believe that Tim Cook expects Apple to come out of nowhere to create its own technology and compete immediately?
Once again — no way!
Apple didn’t become the world’s largest tech company by mistake.
Steve Jobs built a dynamic company that now sits on a mountain of cash.
And now is the time when Apple can finally put the “one-trick pony” arguments to rest — by buying its way to the top of the new technological revolution.
Just think, with Ford’s current market value near $50 billion, the total cost should come out to around $60 billion. (Companies usually pay a premium when acquiring other companies.) Which amounts to less than 25% of Apple’s total cash hoard…
There’s just one thing stopping Apple from pulling the trigger…
The single piece of legislation that investors and corporations alike have been waiting for… Taxes.
Apple currently has the bulk of their cash hoard overseas. Which means to repatriate that money now under the current tax system would bring a whopping 35% tax bill.
Any other year this wouldn’t be an issue. But with the Trump tax plan on the horizon, could be beneficial for Apple to wait until a plan is announced.
Let’s just do the math.
If Congress passes a tax bill with a repatriation rate at say, 10%, and the cost of Ford is about $60 billion, Apple only needs to spend $66 billion.
But without a repatriation tax bill and the same $60 billion cost, cost of Ford spikes to $92 billion!
Do you see my point?
It’s only a matter of time before Apple firmly steps into the autonomous driving market. The question is how big of a toll are they going to have to pay…
Here’s to keeping your edge,
Managing Editor, The Daily Edge